Abstract:
This study analyzes the relationship between migration
and inflation as well as the intervening role of interest rates
in selected OECD countries from 1995 to 2020, covering
periods of turbulence and tranquillity. The study finds that
migration increases inflation in the short run but lowers it
in the long run. In other words, the inflationary effect of
migration is a long-run
phenomenon. Additionally, we find
that the high interest rates help mitigate the inflationary
effect of migration in the short run relative to the low interest
rates. Moreover, additional analysis using the panel
threshold technique further lends credence to the mediating
role of interest rates in the nexus, thus making our
results robust to alternative estimation techniques. These
findings have significant implications for policymakers responsible
for managing inflation.
